When two sets of intermixed dots move in different directions thr:perceived direction of each is considerably shifted [Marshak & Sekuler (1979). Science, 205, 1399-1401; Mather & Moulden, (1980). Quarterly Journal of Experimental Psychology, 32, 325-333)]. This phenomenon has been attributed to 'repulsive' interactions between channels tuned to different directions of motion. However, we report that it is not only the relative direction, but also the density and speed of the sets, which determines the magnitude of the apparent shift. These results are difficult to reconcile-with the notion of 'repulsive' interactions, and we describe an alternative, functionally motivated explanation. In the natural environment, observed motion results from objects moving over background surfaces that may themselves be mobile. Disentanglement of motion signals therefore necessitates a computation of relative motion. We propose that the phenomenon:of 'direction repulsion' results from a deliberate adjustment of observed motion to compensate for an inferred source of 'background' motion. A simple scheme to do this subtracts the weighted vector-sum of all motion signals from observed motion. This relative motion computation quantitatively predicts the observed effects of the density of do;sers on perceived direction: The effects of speed cannot be reconciled with the scheme as it stands, but this could be due to the model's failure to consider the effect of temporal frequency on the effective contrast of the sets. (C) 2000 Elsevier Science Ltd. All rights reserved.